Total Compensation Update: Mandatory Paid Sick Leave for Contractors

Last month, President Barack Obama signed an executive order granting paid sick leave to federal contractors and subcontractors. This order officially goes into effect on January 1, 2017, but companies that employ government contractors are already taking steps to better manage their total compensation programs to accommodate this requirement. What can compensation administrators expect and how can they add value to the types of salary and benefits offered to some our nation’s hardest working people?
How the new paid leave policy affects companies that hire federal contractors


Over the coming year, companies that actively hire federal contractors are tasked with updating their current paid leave policies and total compensation offerings for all employees. Under the new law, federal contractors will be eligible to accrue up to 7 days of paid sick leave every 12 months of service.

This leave is designed to be used for preventative medical care and personal health issues, to care for a sick dependent, or for protection against domestic violence, sexual assault or stalking. This benefit was previously unavailable to federal contractors, so this is a huge move towards greater work life balance for tens of thousands workers around the world.

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Companies that hire federal contractors must work to establish a clearly written policy that’s fair to non-contract employees as well. Many states have already moved towards giving non-contractors access to mandatory paid sick leave and other forms of job protected leave. As of the beginning of 2015, paid sick leave was rolled out in California, Nevada, and Massachusetts, with multiple additional states instituting similar policies. However, this also forces employees to make use of these benefits, as they can roll over into the next year and make it difficult for employers to manage.

Administration of paid leave for federal contractors and total compensation

Clearly, a payroll system that manages paid time off and includes federal contractors is the recommended way to manage this new benefit. In terms of total compensation, comp managers will want to include the dollar value of this paid time off along with other key benefits of employment. In the past, PTO was indicated as the hourly rate, so for federal contractors the benefit could be included as the dollar rate for contracted services. Since they are contractors, and subcontractors, it may be a bit trickier to indicate this on a total comp statement, but it’s not impossible.

This exciting new order is expected to help companies with maintaining a strong and healthy workforce if they use federal contractors and subcontractors.

Learn more about managing your total compensation by downloading the free PayScale whitepaper on “Tips for Communicating Your Compensation Plan” available now.

What do you think?

We love hearing from our readers! Please share your thoughts on this new executive order and how it could impact your business.


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